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Second Circuit Affirms Dismissal of “Wolf of Wall Street” Libel Suit

Applying Actual Malice to Works Containing Fictional Elements

By Vincent Cox

Under what circumstances can the publisher of fact-based fictional works be held liable for defaming a public figure who claims that a character in the work recognizably portrayed her? Plaintiffs claim that the answer is simple: since the publisher of the work of fiction knew it to be false, actual malice is always satisfied, and that the defamatory depiction was "of and concerning" her. Defendants propose an equally simple rule: since the publisher disclaimed any intention to state facts, and never asserted that the depiction was "of and concerning" plaintiff, the publisher is not liable because it never published a statement of and concerning plaintiff with either knowledge of falsity, or a high degree of awareness of probable falsity.

In Greene v. Paramount Pictures Corp., 2020 U.S. App. Lexis 18430) (2d Cir. June 11, 2020), the Second Circuit Court of Appeals affirmed the summary judgment granted to the libel defendants by the U.S. District Court for the Eastern District of New York, 340 F. Supp. 3d 161 (E.D.N.Y. 2018). The case arose from the theatrical motion picture "The Wolf of Wall Street," ("TWOWS") starring Leonardo DiCaprio and directed by Martin Scorsese. The film was "based on actual events," and for the most part tracked facts set forth in the 2007 memoir of Jordan Belfort, the co-founder of the systemically corrupt investment firm Stratton Oakmont.

The screenwriter of TWOWS used several composite characters, such as the Jonah Hill character who played Belfort's partner, the FBI agent character Patrick Denham, a composite of multiple FBI agents, and Nicky Koskoff, a composite of three individuals (one of them Greene), who is portrayed as a poorly toupeed retail broker and attorney, a childhood friend of Belfort's, who enables Belfort's criminal schemes, socializes with Belfort in a milieu of promiscuous sex and illegal drugs, and is ultimately arrested for money laundering. The film contained a disclaimer stating that "certain characters, characterizations, incidents, locations, and dialogue [that] were fictionalized or invented for purposes of dramatization," and include the statement that, "[w]ith respect to such fictionalization or invention, any similarity to the name or to the actual character or history of any person ... or any product or entity or actual incident, is entirely for dramatic purposes and not intended to reflect on an actual character, history, product, or entity.

Plaintiff Andrew Greene, like the character Nicky Koskoff, was one of Belfort's childhood friends, and while at Stratton wore a regrettable toupee that earned him the nickname "Wigwam." Unlike the Koskoff character, Greene was never a retail broker, only joined Stratton long after its founding, and was never arrested for money laundering. Greene contended that Koskoff was recognizable as him, and provided testimony from his former associates to the effect that, despite differences between Greene and Koskoff, they believed that the Koskoff character was inspired by Greene, and that the film was accusing Greene of Koskoff's shameful acts.

By the time the case reached the summary judgment stage, Greene's only remaining claim was for public figure defamation. Defendants primarily based their Rule 56 motions on Greene's inability to prove that Koskoff was "of and concerning" him, his inability to prove material falsity, or to meet his burden to prove actual malice by clear and convincing evidence.

District Judge Seybert rejected Green's theory of "automatic" actual malice. Her formulation of the actual, malice test for fictional and composite character defamation imposes upon plaintiffs the duty to prove actual malice, not only as to the material falsity of the portrayal,' but also as to the "of and concerning" element. She explained:

In the context of a composite or fictional character, the actual malice inquiry is intertwined with whether there was a false statement "of and concerning" the plaintiff. Here, for example, Defendants combined aspects of Plaintiff and others in creating the Koskoff Character: Koskoff shared several of Plaintiff's characteristics but engaged in actions carried out by others--for instance, Kaminsky's trip to Switzerland and arrest in Florida. Therefore, if Koskoff is "of and concerning" Plaintiff, then certain aspects of Koskoff are false as to Plaintiff, and Defendants acted with knowledge of that falsity. If Koskoff is not "of and concerning" Plaintiff, however, then any statement about that character is not false, and thus, not knowingly false. In other words, under a literal application of the test, actual malice is "automatic" if the character is "of and concerning" Plaintiff. See New Times, Inc. v. Isaacks, 146 S.W.3d 144, 162 (Tex. 2004).

Courts have recognized a similar tangling of elements in the analogous contexts of satire and parody, where statements that appear to express facts are instead intended "as outrageous parodies or caricatures expressing an opinion." See Dworkin v. Hustler Magazine Inc., 867 F.2d 1188, 1194 (9th Cir. 1989). For instance, discussing actual malice in the parody context, the Ninth Circuit noted that "it might seem that inquiring into the existence of . . . malice is inconsistent with the conclusion that the [magazine f]eatures contain [opinions,] no[t] statements of fact." Id. But the "apparent inconsistency" is reconciled since "there is no consciousness that [the speaker] is publishing something false, because [the speaker doesn't] think [he's] publishing a statement of fact." Id. (alterations in original). And because knowing or reckless falsification is required to establish actual malice, "if a speaker knowingly publishes a literally untrue statement without holding the statement out as true, he may [ ] lack subjective knowledge or recklessness as to the falsification of a statement of fact required by New York Times." Id. at 1194-95.

The actual malice inquiry for fictional characters can likewise be reframed to avoid "automatic actual malice." As discussed, a statement will only be false if the character is found to be "of and concerning" the plaintiff. Thus, determining whether the defendant acted with knowledge or reckless disregard in making a false statement is dependent on whether the defendant acted with knowledge or reckless disregard in making a statement "of and concerning" the plaintiff through the portrayal of a fictional character. This inquiry collapses into whether the defendant knew or acted with reckless disregard for whether the portrayal of the character would be "of and concerning" the plaintiff (citations omitted).

On appeal, the Second Circuit affirmed the trial court in an unpublished opinion that essentially adopted and restated the district court's reasoning.

First, the panel found that no reasonable jury could find actual malice because the defendants had taken "appropriate steps" to avoid defamation. The panel explained:

Defendants vetted the Film to ensure that it did not violate any third parties' reputational rights. In that respect, defendants' representatives spoke to a number of people, including Belfort, and read the Book and numerous news accounts of the events depicted in the Film. They spoke to screenwriter Terence Winter, who advised that he had reduced "the number of characters [featured in the Book] by creating various composite characters who did not correspond to any single human being." Winter also advised that several characters in the Film, including Koskoff, were assigned fictitious names and were designed to "convey[] the atmosphere of Belfort's financial empire, but were not characters with a specific real life analogue."

Second, the Court of Appeal found that no reasonable viewer of TWOWS would believe that defendants intended the Koskoff character to depict plaintiff because the character in the film had occupational differences from the Greene character, such as working as a broker, rather than the head of the corporate finance department.

Third, the court pointed out that the film included a disclaimer that made clear that some characters in the film were fictionalized. As such, no reasonable jury could find that defendants acted with actual malice.

Takeaway from the Greene Opinions

The District Court's detailed analysis in its published opinion, 340 F. Supp. 3d 161, (E.D.N.Y. 2018), now affirmed by the Second Circuit, provides key guidance for the prepublication review process needed to avoid liability for docudramas, parodies, and works of fiction generally. It is essential that all such works be carefully vetted, and that there be a real effort, thoroughly documented, to show that the producer took steps intended to avoid publishing defamatory falsehoods that could reasonably be found to be of and concerning a real person. It would be prudent for producers of such works to anticipate these issues at the earliest possible stage in order to avoid the need for expensive last-minute changes. Finally, this case stands for the proposition that disclaimers of sufficient prominence can play an important role in avoiding liability.

Vincent Cox and Louis P. Petrich of Ballard Spahr LLP, Los Angeles, represented defendants. Plaintiff was represented by the Law Office of Aaron M. Goldsmith, P.C.
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